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Overseas Property: Prices Should be Measured Carefully
February 9, 2011Article by Ray Withers
2011 looks set to be a very strange old year for the overseas property industry. In 2009 we saw sales start to increase in many markets, and even house prices starting to rise in many countries according to the indices of Knight Frank and Global Property Guide. With that we proceeded into 2010 full of hope for a strengthening recovery. What we got was more of the same, with a little bit of backspin towards the end.
To sum it up, The Global Property Guide revealed in their index of Q3 2009 that house prices had risen in 16 of the 27 countries covered, and fallen in only 11, but in the index just released for the third quarter of 2010 the headline is “half the world up, half the world down” as 17 countries reported price rises, while 18 reported falls.
The truth is, to even look at performance on a global scale is an exercise for the mind alone. We can’t buy a global property, we can buy a property in the world, but its price will not be determined by the global average, but by street-street dynamics, or certainly dynamics on a much smaller scale.
The performance of markets based on how house prices are performing should be done at the country level at the very most, and in fact, if you intend to use house price data to determine where and when to invest then it should be refined even further still, preferably to the postcode then the street.
Take Turkey for example. Turkey has absolutely powered out of recession to become the fastest growing economy in Europe. One would assume, based on this and the fact that the mortgage market has grown by 20% in the past year, that prices would be rising rapidly.
Yet according to the REIDIN Turkey Residential Property Price Indices (TRPPI) the price rises were nominal, with prices growing 1.36% in Adana, 1.36 percent, 0.47% in Ankara, 0.55% in Istanbul, 0.09% in Izmir, and 0.94% in Kocaeli. Even more surprising the TRPPI noted a 1.5% decline in Antalya property prices — Antalya is the top destination for foreign sales.
This data is even more surprising given the fact that local realtors and developers are reporting price rises of around 20% in the coastal hotspots in the last 12 months. It is also worth mentioning that the TRPPI recorded growth in rents in Turkey, with rents in growing 0.30% in Adana, 0.26% in Antalya, 0.58% in Istanbul, 0.83% in Izmir and 0.23% in Kocaeli.
Who is right? Probably all of them, the point being illustrated here is that markets should be researched individually and locally to determine which are worthy for overseas property investment.